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INDIA

INDUSTRY UPDATES

06.06.2012

STEEL, METALS AND MINING COAL

Global
coal prices cool, but weak rupee worries importers

Power
companies that use imported coal have got a respite from skyrocketing fuel
costs as international coal prices have softened considerably, and are
projected to fall further, but the depreciation of the rupee has limited
their gains.

The coal
price index for Australian
coal, popularly called the NewCastle Index, and an Asian benchmark had
jumped 92% between April 2009 and March 2011 to touch 127.87, but has cooled
off to 98.24 last month, dropping 23% over the past year, including a 14%
decline since May. API4, the index for South African coal, mirrored the trend.

Experts believe that the prices may decline further in the months ahead, making
it easier for Indian power generation companies that are reeling under short
supply of coal from Coal
India. Power producers such as NTPC, DVC and the Adani
group say that generation cost in the past few months has declined by up to 5
paise per unit as the rupee's depreciation limited the benefit of cheaper coal.

"Rough estimate shows that the cost of generation will go down by 2-3
paise for every unit of power generated," an Adani Power official said. A
senior NTPC official said: "Although international coal prices have
declined, a rise in rail freight and substantial depreciation of the rupee have
negated some of the declines for Indian companies. Nevertheless, taking into
consideration all the factors, cost of generation has declined by 4-5 paise per
unit."